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Government spending far outstrips tax cuts

Government spending far outstrips tax cuts

Fred Birnbaum
May 23, 2023

Editor's note: After this article went to the press, the Legislative Service Office posted the 2023 Legislative Fiscal Report. The article has been updated to include new information. 

Governor Little frequently touts his tax cuts in public statements and press releases. To be sure, he has cut taxes while growing state spending significantly. If that sounds too good to be true, there are a few things to keep in mind.  

In his March 31st press release near the end of the 2023 session, the governor boasted, “No other state has given back more taxpayer money per capita than Idaho. We’ve turned back $2.7 billion in tax cuts to Idahoans just in the past three years.” 

The challenge in understanding this number is that the governor includes lots of one-time rebates in his total and not ongoing tax relief. 

Let’s try to decipher these numbers. 

According to an analysis by LSO, income tax rate reductions from 2021 and 2022, including the extra session, will provide $575 million of ongoing income tax relief. Due to the complexity of the 2023 session property tax cut bill, House Bill 292, it is difficult to arrive at a clean estimate of the ongoing impact. Some of the money will go directly to homeowners, while other funds are designed to take the pressure off of schools with funds to offset the need for new bonds and levies.

In his press release, the governor touts the figure as $117 million in ongoing relief. Taken together, this puts the ongoing relief at just under $700 million. If we choose to include the 2018 tax relief, the total is just over $800 million of ongoing income tax and property tax relief. The governor assumed office in January 2019, so this last addition predated his administration. 

However, let's look at the spending growth over the last several years. Not the one-time spending for the many projects touted by the governor for roads, water projects, and other infrastructure, but the ongoing spending. The Legislative Service Office just released their 2023 Legislative Fiscal Report which contains an up-to-date summary of ongoing spending. In fiscal year 2022 (FY22), the all-funds ongoing spending was $9.74 billion. For FY24, the fiscal year that starts on July 1, 2023, the ongoing spending is $12.22 billion. You read that right; the ongoing spending is up 25.5% or $2.48 billion in just two years, dwarfing the ongoing tax cuts. If we go back to FY19, the ongoing spending was $8.06 billion. So in five years, it is up 51.6%, a compound annual growth rate of 8.7%.

Now, some of you might point out that the total spending increase includes federal dollars, and we cut taxes from state funds. That is factually correct. However, Idaho has received nearly $23 billion in funds related to COVID and the public health emergency over the last few years, including money for individuals and businesses. And a significant sum of this borrowed and printed money has flowed into state coffers. General Fund revenues are up by over $2 billion just from FY20 to FY22, from $4.03 billion to $6.20 billion.

We point this out for two reasons. The tax cuts Idahoans have received are smaller than they could have been if ongoing spending had been restrained. Not the one-time projects, the ongoing spending. The base budget, which is the ongoing spending, needs to be thoroughly reviewed by the Legislature next session. The huge growth in Medicaid, for example, is now built into the base budget, which is why removing those who are ineligible is crucial to getting spending under control.  

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